Correlation Between Norsk Hydro and Lifecare
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Lifecare at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Norsk Hydro and Lifecare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norsk Hydro ASA and Lifecare AS, you can compare the effects of market volatilities on Norsk Hydro and Lifecare and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Norsk Hydro with a short position of Lifecare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Lifecare.
Diversification Opportunities for Norsk Hydro and Lifecare
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Norsk and Lifecare is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Lifecare AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifecare AS and Norsk Hydro is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Norsk Hydro ASA are associated (or correlated) with Lifecare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifecare AS has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Lifecare go up and down completely randomly.
Pair Corralation between Norsk Hydro and Lifecare
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 3.9 times less return on investment than Lifecare. But when comparing it to its historical volatility, Norsk Hydro ASA is 3.04 times less risky than Lifecare. It trades about 0.01 of its potential returns per unit of risk. Lifecare AS is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,152 in Lifecare AS on August 31, 2024 and sell it today you would lose (667.00) from holding Lifecare AS or give up 30.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Lifecare AS
Performance |
| Timeline |
| Norsk Hydro ASA |
| Lifecare AS |
Norsk Hydro and Lifecare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Lifecare
The main advantage of trading using opposite Norsk Hydro and Lifecare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Lifecare can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lifecare will offset losses from the drop in Lifecare's long position.| Norsk Hydro vs. Yara International ASA | Norsk Hydro vs. Equinor ASA | Norsk Hydro vs. Telenor ASA | Norsk Hydro vs. Orkla ASA |
| Lifecare vs. Bergenbio ASA | Lifecare vs. SoftOx Solutions AS | Lifecare vs. Aega ASA | Lifecare vs. Saga Pure ASA |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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